Cuba's struggle for self-sufficiency - aftermath of the collapse of Cuba's special economic relations with Eastern Europe

CUBA'S STRUGGLE FOR SELF-SUFFICIENCY

The demise of the Council for Mutual Economic Assistance (COMECON), the Soviet-bloc trade organization, has presented Cuba with a challenge almost as great as the trade embargo imposed by the United States in 1960. Cuba's initial reaction to the embargo was to initiate a program of food self-sufficiency and to attempt to reduce its dependency on sugar exports. As Cuba declared its socialist path and became integrated into COMECON trade on the basis of its comparative advantage in sugar production, the goal of food self-sufficiency was largely abandoned. The demise of COMECON and the ongoing changes in the Soviet Union, along with growing popular recognition of the costs of Cuba's historical dependency, whether upon the United States or the Soviet Union, have forced the Cuban leadership to reconsider the nation's development strategy.

In late 1989, surveying events in Eastern Europe and the probable move to hard-currency trade among COMECON members, the Cuban government announced a major program of new investments in the agricultural sector, known as the Programa Alimentario (the Food Program), designed to make the country more self-sufficient in foodstuffs. As Soviet deliveries of wheat and petroleum became increasingly unreliable, Fidel Castro noted in a major speech in March 1990 to the Congress of the Federation of Cuban Women that the country might enter "a special period in peacetime," a period characterized by austerity and sacrifice.

In the months that followed, it became increasingly evident that the Soviet Union was not going to be able to deliver the 13.3 million tons of petroleum promised for 1990. Since 99 percent of Cuban oil imports have come from the Soviet Union, the repercussions for the Cuban economy were daunting, affecting both foreign exchange earnings and domestic production. During the 1980s, Cuba had striven to reduce domestic oil consumption in order to re-export the surplus. Re-exported petroleum and petroleum products became the second major export (after sugar) and in a number of years, the leading source of hard currency earnings. As the months passed, it became apparent that surplus petroleum would no longer be available for re-export, and, moreover, that the shortfall would have direct repercussions on internal economic activity.

In late August 1990, when it was estimated that the oil shortfall would be on the order of 20 percent, Cuban officials announced a series of rather severe energy conservation measures. In September, as such measures as extended rationing were put into effect, it was announced that Cuba was officially in the "special period in peacetime." These measures helped to soften the impact of the shortfall in petroleum imports; the 1990 year-end tally showed that the Soviets provided about ten million tons less of oil, a 25 percent shortfall in deliveries.

My aim in this article is to provide a preliminary assessment of the effect of the demise of COMECON on the Cuban economy, focusing principally on the agricultural sector and the possibility of food self-sufficiency. After reviewing the main measures instituted in August and September as a response to the immediate crisis, I will analyze the extent of Cuba's food dependence, and then the possibilities for the national food program to successfully promote import substitution. I will conclude with a review of the recent trade agreements which the country has negotiated with the Soviet Union and China in order to assess Cuba's prospects in this period of transition.

The Special Period in Peacetime: Emergency Measures

The first set of measures, introduced on August 26, 1990, was a response both to the expected shortfall in Soviet petroleum deliveries and to the skyrocketing price of oil, occasioned by the Persian Gulf crisis.(1) The most severe measure was a mandated 50 percent cut in state energy consumption across all industries and services. State enterprises were instructed to analyze their consumption of petrol and electricity with a view toward switching to alternative technological packages if necessary. For example, in the agricultural sector, animal traction was to be utilized whenever possible, such as for transporting workers to the fields; enterprise managers were asked to increase the number of oxen raised on state farms so that if the petrol shortage were severe, they would be able to plow and cultivate without using tractors.

In many industries the reduction in energy consumption was to come primarily by reducing the number of work shifts. Other, particularly energy-intensive industries, or those dependent on scarce imported inputs, were to be closed down altogether. For example, it was decided right away to shut down the fuel-greedy Moa nickel plant, although this would reduce Cuba's potential nickel exports. The start-up of the new Cienfuegos oil refinery was postponed in view of the expected reductions in oil deliveries. All of these measures, of course, imply growing numbers of "excess" workers. Rather than allowing this to translate into growing unemployment, the government plans to entice these workers into the agricultural sector, as will be explained below.

New construction has come to a virtual halt, since cement production has been drastically reduced due to its heavy petroleum input requirements. Nonetheless, most construction projects already underway are to be completed, including the extensive facilities being built for the 1991 Pan American Games. The halt of new housing construction is sure to be an unpopular measure, particularly because of Havana's chronic housing shortage. After years of favoring other regions of the country with respect to new housing, the government had finally given Havana priority in the mid-1980s, raising expectations that the housing problem might soon be solved.

Gasoline for private consumption was reduced by 30 percent. The amount of fuel to which individuals are entitled depends on the make of the automobile; Lada owners, for example, are allocated 60 liters per month. In February 1991 this allocation was reduced to 50 liters per month. Domestic electricity consumption was reduced by 10 percent. The population was warned that if this target was not met, electricity would be cut one day a week, rotated daily by neighborhoods, or alternatively, that households which did not comply with the measure would lose access to electricity for thirty days. While blackouts have not yet been necessary, in February there was considerable discussion over an impending plan to cut electricity for three days to those households who had not met the 10 percent target.

Public transportation, which has always been deficient, was to be reduced still further, with fewer buses in circulation during non-rush hours. The streets of Havana are now increasingly filled with bicycles. Some 200,000 were imported from China and distributed among young people during late 1990. The plan is for an additional 700,000 bicycles to be assembled in Cuba from Chinese and Cuban components during the first six months of 1991. While bicycles are commonly used for transportation in the Cuban countryside, their introduction on such a massive scale in Havana is quite a novelty. Young people seem delighted with the "ride a bike" campaign, but it remains to be seen whether other groups will be able to change their transportation habits so readily.

Another energy-saving measure, abolition of the traditional Saturday working day in government offices, has indisputably been well received. In recent years, most state employees have worked every other Saturday, but it has never been clear that much was accomplished. Abolishing the Saturday workday is expected to save fuel due to reduced transportation requirements and to assist in reducing state consumption of electricity.

A number of measures were announced in September 1990 in response to unintended cuts in imports. Cuba normally relies on the Soviet Union for newsprint, and deliveries had been very unstable during the first half of the year. Moreover, the domestic paper industry was in paralysis as a result of shortages of pulp and bleaching agents normally imported from the Soviet Union. To deal with the shortage of newsprint, Granma, the official national newspaper, was cut to eight pages an issue (with six pages on Saturday), and several daily newspapers, such as Juventud Rebelde, were converted into weeklies. Since domestic paper production had come to a virtual halt, the publication of most magazines and journals was suspended, and that of books was greatly reduced.

These measures caused distress among intellectuals, who worried about the consequences in terms of the free flow of ideas and their own ability to publish. And needless to say, there are now many journalists among the "excess" workers. But there are some signs that the paper industry has overcome the immediate crisis, for several journals are back in print, albeit on a smaller and less frequent basis.

The planned cut in imports announced in September centered on energy-intensive appliances.(2) Air conditioners, washing machines, and refrigerators are no longer being imported. Sales of air conditioners and washing machines to individuals were suspended, with the remaining stock to be distributed among high-priority social institutions. Coupons which had already been distributed for the right to purchase refrigerators, black and white television sets, electric fans, and electric beaters would be honored during 1990, but these commodities would no longer be available for sale in 1991.

The September measures considerably extended the rationing system for both industrial products and foodstuffs. Some 242 industrial products (181 more than before) are now "normed"--that is, the quantity and frequency of individual purchases is regulated--to assure their equitable distribution. The new items subject to rationing include shoes, most articles of clothing, hygienic and personal products, and furniture. The government committed itself to maintaining adequate supplies of certain energy-saving items--such as thermoses and pressure cookers--and of entertainment goods which use little energy--one radio, record player, or tape recorder can be purchased annually per household.

The only appliances to be available for sale during 1991 are electric irons (but only for newlyweds), and some 20,000 color television sets, available through the Trade Union distribution system to outstanding workers (as "work-incentive" goods); however, these will only be sold in exchange for black and white televisions. The state is trying to reduce the total number of the latter, since they consume almost five times more energy than color television sets; the trade-in is also expected to provide a source of spare parts for the black and white sets remaining in use.

The "parallel" market--the government-controlled market characterized by mark-up pricing (i.e., no subsidies) and no restrictions on the quantity or frequency of purchases--is to continue, but only for a few luxury goods, products where there is little demand, or clothing in extreme sizes or old styles. A few items, such as kitchen cloths, electric shavers, and hand-made wooden toys, will continue to be unregulated (available through venta libre).(3)

The food rationing system covers two types of sales: 1) normed sales, which is what has characterized the rationing system up to now, with a certain quantity guaranteed to the population each month at what is generally a subsidized price; and 2) controlled sales, where supplies would be distributed in an equitable fashion whenever they were available, guaranteeing each household its turn to purchase the item.

The same basic 35 products which were on the rationing card throughout the 1980s were maintained under the former category, generally at the same prices prevailing since the 1981 price reform. The extension of rationing had to do with 28 new products now included in the latter category. These products had previously been available in the parallel market or were not regulated. They include eggs, pork, bacon, sausage, fish, canned meat and fish, pastas, mayonnaise, ketchup, and spices. The prices of these products remain the same as before (i.e., the newly rationed items will not be subsidized, but neither is it planned for their prices to increase).

The parallel market in foodstuffs has continued to function, as have the neighborhood agromercados, where fruits and vegetables are sold off-the-ration in unlimited quantities, but as in the case of industrial products the selection is much more limited. In February, one could purchase rice and honey in the parallel market and the agromercados were well stocked with tomatoes, onions, cabbage, papaya, and grapefruit. The sale of milk was still unregulated at the 1988 price of 1.0 peso per liter.

Most people I spoke with considered the extension of rationing to be a backward, if necessary, step to assure that shortages were dealt with in an equitable fashion--a basic principle of the Cuban revolution. To have eggs on the ration card after so many years of ready availability caused consternation this winter. Cubans rely greatly on eggs as a source of protein (production had increased from 188 eggs per capita in 1970 to 265 in 1985) and the allocation prevailing in the fall (four eggs per week per person) was considered to be deficient. The allocation was increased to six eggs per week in mid-February, a move welcomed by many.

Cuba's Food Dependency

Over the last two decades Cuba has made important strides in reducing its dependence on food imports and the share of foodstuffs in the total import bill. Whereas in 1970 food imports constituted 20 percent of total imports (about the same share as in 1958), this ratio was reduced to 9.5 percent in the 1986-1988 period.(4) Nonetheless, in this latter period Cuba was importing 719 million pesos(5) worth of food annually, the bulk from the Soviet Union, and among the top items were products that Cuba cannot readily produce.

The major food imports in the 1986-1988 period (in descending order of average annual value) were wheat, canned meat, corn, rice, fish, lard, beans, butter, wheat flour, powdered milk, frozen chicken, condensed milk, and cheese. If animal feed were to be included in this listing, it would rank second. Of the top thirteen items, the Soviet Union supplied fifty percent or more of the volume of nine items, including all of the wheat flour, condensed milk, and fish, and 89 percent of the wheat.

Eastern Europe was much less important than the Soviet Union in terms of Cuban food supplies, with food imports of any quantitative significance forthcoming only from Bulgaria and East Germany. Bulgaria supplied 29 percent of the cheese, 20 percent of the lard, and 4 percent of the canned meat; East Germany supplied 6 percent of the lard and butter imported in that period.

In terms of import substitution, considerable gains were made in rice production during the 1960s, and in poultry, canned meat, cheese, and butter production during the subsequent decade.(6) During the 1980s there have been important strides in the domestic wheat milling industry (reducing imports of wheat flour in favor of wheat) and continuing increases in rice, poultry, and butter self-sufficiency.

Cuba's food vulnerability centers on three products: wheat, beans, and animal feed. Cuba does not produce wheat, a crop unsuited to the tropics. Bread, however, is a standard component of the Cuban diet. Shortfalls in Soviet deliveries of wheat have already caused domestic problems, principally in January 1990, with rising bread prices and long lines at bakeries, since bread is not rationed.

Black beans are an essential component of Cuban diets, and while domestic production has increased steadily over the last decade, the country is far short of being able to meet internal demand--in the late 1980s Cuba was importing 89 percent of the domestic consumption of beans. The prospects for rapidly expanding production are unclear, since local varieties of beans are reportedly low-yielding, and research on developing higher-yielding varieties suitable to the climate has begun only recently. Mexico is Cuba's second major supplier of beans, following the Soviet Union.

The corn which is imported is primarily used for animal feed, since corn oil or corn flour are not major consumption items, as in Mexico or Central America. Domestic corn production has increased steadily in recent years, but Cuba has yet to develop high-yielding varieties, making its more extensive production unprofitable. In the 1980s, Argentina was the second major supplier of corn, following the Soviet Union in volume. Cuba's growing self-sufficiency in milk and poultry production, as well as the reported steady increase in the per capita consumption of milk, eggs, and chicken, has depended upon growing volumes of not only corn imports, but also animal feed.

The Food Program

The national food program, launched in December 1989, is both a response to the demise of COMECON and an outcome of the broader process of "rectification of errors" in the management of the Cuban economy which began in 1986.(7) In that year, Cuba ended its brief experiment with free peasant markets--partly because they led to growing income and consumption inequalities and were viewed as a corrupting influence--and the state began searching for ways to improve the food distribution system while maintaining the diversity of foodstuffs these markets had provided.(8)

As it evolved, the food program came to have four major aims: 1) to reduce losses in Cuba's food distribution system and to improve the quality of fresh fruits and vegetables; 2) to deepen import substitution in foodstuffs to lessen Cuba's vulnerability to the ongoing changes in its trade relationships; 3) to make the province of Havana and nearby Havana city nearly self-sufficient in fruits, vegetables, and viandas (a Cuban term for root crops and plantains), meat and dairy production; and 4) to assure adequate supplies of foodstuffs to the expanding tourism sector, which the Cubans are counting on to become a major source of foreign exchange in coming years.

The program itself consists of new investments and some reorganization of the food distribution system, combined with fairly massive investments in irrigation systems in order to intensify agricultural production. The major investments in the food distribution network center on wholesale and retail storage capacity, including refrigerated facilities for fresh produce; Cuba's fleet of refrigerated trucks is also being augmented. The state agricultural procurement system is being expanded, and many more agencies are now located in small towns. The reorganization of the distribution system also included linking state farms and production cooperatives in the province of Havana directly to produce markets in Havana city, to reduce the spoilage from more centralized collection, storage, and distribution.

While the initial focus of the food program was on the distribution system, plans were being drawn up in terms of how import substitution was to proceed. The focus of the program increasingly became the province of Havana, primarily as a result of the petroleum shortage. If the city of Havana would no longer rely on other provinces for food, considerable savings would be realized in transportation costs. Moreover, Havana city has the largest potential labor force that can be mobilized for seasonal agricultural work.

The heart of the production aspect of the food program has become irrigation, to increase yields and shorten the turn-around-time of land use. Major new investments in irrigation are underway in rice, viandas, vegetable, citrus, and sugar cane production. The new investments include irrigation systems of various types as well as the construction of thirty new dams and hundreds of miles of major and minor canals.(9)

The plan for rice is to irrigate more efficiently some 160,000 hectares, almost all the land under cultivation, in order to achieve national self-sufficiency within five years. The land dedicated to viandas and vegetable production is being increased substantially by reducing the area planted in sugar cane, with the irrigated hectarage in these food crops to double. Crops that in the past had been largely ignored--root crops, grains, and vegetables--are also the subject of intense research.

While it initially seemed that Cuban officials planned to reduce the country's dependency on sugar exports, since land is being taken out of sugar cane in order to plant foodstuffs, in fact, the food program includes renewed efforts to increase sugar cane yields in order to maintain total output at current levels. Sugar cane is viewed not only as the country's primary source of foreign exchange earnings for some time to come, but also as an input for increased milk and meat production, since sugar by-products are an important source of animal feed. As of 1988 a new drainage and irrigation system which reportedly almost doubles cane yields had been introduced on 21 percent of sugar cane lands; the goal is to cover 67 percent of the cane area by 1995.

The national food program also includes major investments in meat and dairy production. Twenty-seven new integrated hog production centers are under construction and the existing 23 centers are being modernized. The plan is for pork production to double, with the goal of reaching 200,000 tons of pork per year in 1992. Pork is the Cubans' favorite meat, and the increase in output will also enhance Cuba's self-sufficiency in lard, which is indispensable to Cuban cooking.

Cuban officials are planning the construction of some 1,800 new poultry breeding centers, which are expected to increase egg production by 700 million and chicken production by 40,000 tons annually. Moreover, 1,000 new dairy complexes are to be constructed over the next five years, in order to expand milk production. Finally, efforts are underway to increase freshwater fish production through investments in aquiculture, to increase fingerling production to stock Cuban rivers.

If all goes according to the plan, the program should allow Cuba to achieve near self-sufficiency in rice and poultry and to reduce its vulnerability in supplies of lard, milk, fish, and canned meat. It is unclear to what extent corn and bean production will be targeted under the food program, with the decisions probably depending on the results of the agricultural research effort presently underway.

Because wheat cannot be produced domestically, availability of bread and wheat flour in Cuba will remain extremely vulnerable to international conditions. The increased supplies of vegetables and viandas, however, should assure diversity in the Cuban diet, as well as provide a needed back-up for food supplies should a shortage of foreign exchange limit food imports.

The potential success of the food program, nonetheless, very much depends on Cuba's ability to generate foreign exchange, for the program is heavily import dependent, particularly in its initial stages. Considerably expanding the area under irrigation is largely dependent on the import of irrigation equipment. While Cuba now produces Fregat irrigation systems as well as various kinds of pumps and tubes, it imports much of the other equipment. A program of this magnitude also raises the demand for agricultural implements and machinery. While Cuba now produces tractors, trailers, harrows, and combines, as well as many agricultural implements, imports of these items, as well as spare parts, averaged some 231 million pesos annually in 1986-1988.

The import of petrol-guzzling machinery is, of course, being discouraged, but it is questionable whether the production targets of the food program can be met on the basis of the existing stock of machinery and animal power. In 1988, Cuba had only 46,200 oxen, down from 102,000 in 1970, as a result of the heavy mechanization of agriculture in this period.(10)

Increasing agricultural production across the board will also increase the demand for imports of fertilizers, herbicides, and pesticides. Production of fertilizer has increased steadily over the last decade; nonetheless, in 1986-1988 Cuba was still importing 67 percent of its consumption of fertilizer, and 82 percent of that of herbicides and pesticides. Domestic fertilizer production is dependent on heavy petroleum inputs, so it is doubtful that there is much room for import substitution in this area. In the case of herbicides, domestic consumption might decline, since massive numbers of urban workers are being recruited to weed the increased acreage dedicated to food crops.

Increasing meat, poultry, and dairy production under the program will require growing quantities of animal feed. While sugar by-products will provide some of the expected increase in supply as will improved pasture, the poultry industry will remain very vulnerable to foreign exchange availability.

Data do not permit a rigorous analysis of the cost effectiveness of the import substitution program. Overall, the value of animal feed and agricultural-related inputs and equipment imports averaged at least 500 million pesos a year in the 1986-1988 period, equivalent to 7 percent of total imports. It is very likely that the value of agriculture-related imports will have to increase, particularly as irrigation systems are installed to reduce the share of foodstuffs in the total import bill. But it must be kept in mind that the current level of agricultural-related imports also goes to support the generation of 83 percent of Cuba's export earnings.

The national food program could also generate domestic surpluses, non-traditional exports, and foreign exchange earnings. Over the last decade, Cuba has made important strides in diversifying its agricultural exports, with non-sugar exports increasing from 173 million pesos in 1980 to an average 404 million pesos per year in 1986-1988, accounting for 9 percent of total agricultural exports in that latter period.(11) Among the leading non-sugar agricultural exports are fish, citrus, potatoes, peppers, and canned fruits and vegetables.

Cuba is also investing considerable resources in other non-traditional export industries, principally biotechnology and pharmaceuticals. Cubans hope that steady increases in these new exports, along with growing foreign exchange earnings from tourism, will cushion the blow of reduced sugar exports to Eastern Europe and lower preferential prices for sugar in the Soviet market, and allow the country to pay for critical imports required by the national food program.

Self-Sufficiency and Labor Mobilization in Havana

In 1989, Havana province produced around six million quintals of vegetables and viandas (a quintal is about 100 pounds); the goal of the food program is for Havana province to produce 15 million quintals per year. In order to reach self-sufficiency for the province and city of Havana, some 40,000 hectares are being dedicated to viandas and vegetable production, the bulk on state farms, but also on individual farms and production cooperatives.

Production is expected to increase rapidly both because of the new investments in irrigation, which increase yields, and because of a massive increase in the size of the agricultural labor force. An increased supply of labor allows a more rapid turnaround of crops raised on irrigated land.

The news that Cuba was once again sending urban residents to the fields raised specters for Cuba watchers of the 1960s, and of the failure to reach the highly publicized 10 million ton goal for the 1970 sugar harvest. But the long-term goal of the current mobilization effort is quite different--to settle potentially unemployed urban workers on state farms. The material conditions under which urban workers reside in the countryside are also remarkably different from those of the 1960s.

There are now two basic forms of mobilizations: contingentes and movilizaciones. The contingentes are a recent innovation, based on the model of the use of this organizational form in the construction industry over the last three years. They involve a two-year commitment to work at least a twelve hour day, six days a week, as model workers. Participation in them is attractive because of the higher than average wage (some 68 percent higher) and excellent living conditions. The contingentes, which involved up to 20,000 workers in the construction industry, are considered to have been a great success, with these workers twice as productive as regular construction workers.(12)

The plan is to have 24 contingents working on the food program in Havana province. Currently over 5,000 workers are involved in this program, and the number is to increase once permanent housing is ready. Some forty new agricultural communities are being built on the state farms, with what Castro has promised will be excellent housing for 10,000 households. The communities are to include a school, a health post, a childcare center, and even a swimming pool, among other amenities. Efforts are being made to induce workers in industries which are shutting down to join the contingentes. Planners hope that the prospect of good housing will induce many of these workers to continue living and working in rural areas after their two year commitment expires.

The movilizaciones involve urban workers and university students volunteering to spend from two to three weeks in the countryside working for the food program. Unlike the mobilizations of the 1960s, the state has invested considerable resources in building good housing and in assuring plentiful food to those who participate. Some 61 new campamentos, each with a capacity for about 3,000 workers, have been built in the province of Havana. Five of the campamentos house temporary labor for the production cooperatives and the individual peasant sector; the others are located on state farms. The dormitories are partitioned so that there are only ten people (rather than several hundred) to a room, and are equipped with screens and electric fans. According to people who participated in the agricultural mobilizations of the 1960s, there is a vast difference in living conditions.

During March and April, 26,000 Havana workers were to be mobilized continuously for agricultural work. As Castro observed at the Havana provincial assembly of the Cuban Communist Party in February, the volunteers in the movilizaciones are considerably less productive than workers organized in the contingentes. He noted that the aim behind the movilizaciones is as much political as economic--in keeping with the goals of the rectification process--for they provide an opportunity for urban workers to renew their sense of revolutionary commitment by being part of the solution to the economic crisis.(13)

Nevertheless, the movilizaciones do appear to make a difference in production results. At the party provincial assembly, for example, the manager of the state farm "Miguel Soneira" reported that on his farm 576 permanent workers work 3,600 hectares of land dedicated to viandas and vegetable production. Since June 1990, the enterprise has been able to count on an additional 1,000 workers each day, all volunteers from Havana. With this additional labor force, the farm will be producing 40 percent more during 1991 than last year.

The production increases are even more dramatic where the new irrigation investments are already in place. On the state farm "Alquizar," 190 workers produced 404,000 quintals of viandas and vegetables last year; in 1991, with a larger number of permanent workers (398) due to the addition of a contingente, plus 1,300 volunteers working each day, the farm expects to produce over a million quintals. This year the city of Havana will still be supplied by other provinces, but as investments mature, the province of Havana is expected to fully supply the city with everything but pineapples.

In late December 1990, Cuba and the Soviet Union finally signed the long-awaited trade agreement for 1991. The trade negotiations, which had begun in May, were summarized by Minister of Foreign Trade Ricardo Cabrisas, as being very "complex," given the uncertainty prevailing in the Soviet Union and the many changes its economic system is currently undergoing.(14)

The accords continued a number of benefits to Cuba from its special relationship with the Soviet Union. While non-sugar trade (including petroleum) will henceforth be at world market prices, the Cubans were successful in maintaining a preferential price for sugar exports. The price agreed upon, reportedly in the range of 19 to 25 cents per pound, is less than what the Soviets have paid for sugar over the last five years, but higher than world market prices, currently around 9 cents a pound. The new prices are actually in the range of the price paid for sugar in the preferential U.S. and European sugar markets.

There is little change in the basic structure of Cuban imports from the Soviet Union, which consist of fuel, foodstuffs, raw materials, equipment, and spare parts. The level of imports of equipment for priority programs has been drastically reduced, however, from 1.2 billion rubles to an estimated 400 million to 500 million rubles. Petroleum imports are to remain at 1990 levels as are cereal imports.

Cuba will continue to export its traditional products to the Soviet Union--sugar, nickel, citrus, and tobacco--although the level of nickel exports is expected to be lower and that of citrus exports will be higher. Large increases are planned in certain non-traditional Cuban exports, particularly pharmaceutical and biotechnological products and medical equipment. The value of trade in these new items will probably be on the order of $800 million. Overall, the value of Cuba's exports to, and imports from, the Soviet Union are expected to be less than in previous years, because of the lower price already agreed to for sugar and the lower level of non-essential Cuban imports from the USSR. Nonetheless, a Cuban trade deficit is already expected, and the Soviets have agreed to finance it; the Soviets have also agreed to a continued moratorium on Cuba's debt to the USSR.

While the agreement was welcomed with relief, Cuban officials are not yet too confident, for a number of difficulties remain. For example, Cuba previously arranged its trade through only 62 Soviet institutions; now there are up to 25,000 authorized trading entities with whom the Cubans may have to sign specific contracts. Moreover, world market prices for many goods still have to be determined. Also, not all of Cuba's imports and exports are products which the Soviet government controls centrally. While petroleum exports and sugar imports are among the items over which the Soviet government hopes to keep control, whether it is successful in doing so very much depends on current events in the Soviet Union. As the Minister of Foreign Trade noted, the trade agreement is very much a transitional, "provisional" agreement, one that is not 100 percent guaranteed.

Given the switch to trade at world market prices for all commodities except sugar, and the uncertainty of Soviet deliveries, Cuba is also attempting to develop new trading partners. The most important new partner to emerge thus far is China. A five-year trade agreement was signed in January, valued at about $500 million per year.(15) Cuba is to export sugar, citrus, iron, biotechnology and pharmaceutical products, and medical equipment to China and to import foodstuffs and equipment for the sugar and light manufacturing industries.

Cuban officials are also counting on increased trade with Latin America; they hope that Argentina and Mexico will eventually become the most important suppliers of such major Cuban food imports as corn, beans, and wheat. Trade expeditions have also been sent to most other Latin American countries.

In sum, Cuba is attempting to meet the challenge of the post-Cold War era by diversifying its trading partners and the composition of its exports, by seeking enhanced food security through import substitution, and by extending central planning. Ironically, only by extending central planning--in terms of reduced energy consumption, greater rationing, planned investment in food production, and labor mobilizations--can Cuba maintain an equitable distribution of the costs of the general demise of centrally planned economies.

NOTES

(1)The energy conservation measures are described in Granma, 29 August 1990. (2)These were announced in Granma, 26 September 1990. (3)The distinction between venta libre ("free" or unregulated sales) and the parallel market generally includes both the locale of the retail sale and pricing policy. Products available under venta libre are usually sold in the same outlets as items under the rationing system, whereas items sold on the parallel market are available only in special stores, or in the case of agricultural produce, in the agromercados. Traditionally, venta libre products are sold at cost of production or at a very small mark-up, whereas parallel market commodities are characterized by mark-up pricing, with the mark-up sometimes substantial. (4)The subsequent analysis is based on data published in Comite Estatal de Estadisticas (CEE), Anuario Estadistico de Cuba, 1988, Tables XI.16 and XI.18. (5)The exchange rate used for foreign trade by the Cuban National Bank since 1987 sets the U.S. dollar equal to the Cuban peso. (6)The analysis of import substitution is based on a table drawn up by the author estimating the apparent domestic consumption of each of these products and the degree of import dependence, derived from data published by the CEE, tables VI.34, VII.23, VIII.51, VIII.52 and XI.16. The table is available from the Monthly Review office. (7)For a fuller discussion of the rectification process, see Max Azicri, "The Cuban Rectification: Safeguarding the Revolution while Building the Future," in S. Halebsky and J. Kirk, Transformation and Struggle: Cuba Faces the 1990s (New York: Praeger, 1990) and Jose Luis Rodriguez, "Los Cambios en la politica economica y resultados de la economia cubana, 1986-1989," Cuadernos de Nuestra America, 7, no. 15 (1990). (8)For a discussion of the free peasant market experiment, see C. D. Deere and M. Meurs, "Markets, Markets Everywhere? Understanding the Cuban Anomaly," Economics Department Working Paper 1990-6, University of Massachusetts, Amherst. (9)A brief summary of the investment program was published in Granma, 1 October 1990. (10)CEE, Anuario Estadistico de Cuba, table VIII.64. (11)CEE, Anuario Estadistico de Cuba, table XI.15. (12)J. L. Rodriquez, "Los Cambios," p. 69. (13)Granma, 4 February 1991. (14)Interview published in Granma Weekly, 3 February 1991. (15)Granma, 27 January 1991.

Carmen Diana Deere, professor of economics at the University of Massachusetts, Amherst, and president of the Latin American Studies Association, recently spent four weeks in Cuba, carrying out research on the cooperative sector. She is indebted to Carollee Benglesdorf, Rafael Hernandez, Arthur MacEwan, Niurka Perez, Marifeli Perez-Stable, and Andy Zimbalist for comments on a previous draft of this paper.

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